Report
What would happen if Phillips curves were to return?
The COVID crisis may have permanently altered the balance of power in OECD countries’ labour markets. In the United States and the United Kingdom (but not in the euro zone or Japan), this is due to the decline in the participation rate. This may also result from the rejection of certain types of jobs (arduous, seasonal, with unusual hours, etc.). If this is the case, Phillips curves will return (again, more likely in the United States than in the euro zone). What would be the consequences? In the second half of growth periods, the rise in inflation would force central banks to switch to more restrictive monetary policies: monetary policy would become countercyclical again; Recessions would be like traditional recessions of the past, caused by rising interest rates and a downturn in corporate earnings.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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